DCIT, Circle-2, Sangli V. M/s. Western Precicast Pvt. Ltd., Sangli

ITA 2524/PUN/2012

• Counselvise Citation: 252424514 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 21-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VERMA
• Assessee Lawyers: N P MACHAWE
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.2524/PN/2012 (ASSESSMENT YEAR : 2009-10) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-2, SANGLI. . APPELLANT VS. M/S. WESTERN PRECICAST PVT. LTD., GAT NO.170, KUPWAD ROAD SAVALI, TAL- MIRAJ, DIST.- SANGLI. PAN : AAACW3853C . RESPONDENT DEPARTMENT BY : SMT. M. S. VERMA (CIT) ASSESSEE BY : SHRI N. P. MACHAWE DATE OF HEARING : 22-01-2014 DATE OF PRONOUNCEMENT : 22-01-2014 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), KOLHAPUR DATE D 12.10.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 16.03.2011 PAS SED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2009-10. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDI NG THAT THE COST OF NEW WIND MILL WILL INCLUDE ALONGWITH THE COST OF THE WI ND TURBINE GENERATOR, THE COMPONENTS FOR GENERATION OF ELECTRIC SUPPLY AND EL ECTRICAL ITEMS AND COMPONENTS OF RE DEVICE AND TUBULAR TOWERS FOR THE PURPOSE OF ALLOWING DEPRECIATION AT SPECIAL RATE AS THESE ITEMS ARE NOT WIND MILL OR SPECIALLY DESIGNED DEVICES, WHICH RUN ON THE WIND MILL. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN H OLDING THAT LABOUR WORK RELATED TO INSTALLATION OF WIND TURBINE GENERATOR W AS REQUIRED TO BE INCLUDED IN THE COST OF THE WIND MILL FOR ALLOWANCE OF DEPRECIA TION AT SPECIAL RATE WHEN THE ITA NO.2524/PN/2012 A.Y. 2009-10 SAID EXPENSE WAS REQUIRED TO BE SPREAD OVER IN THE PROPORTION OF COST OF CIVIL WORK, COST OF WIND MILL AND COST OF PLANT & MACHINE RY AND THE DEPRECIATION WAS TO BE ALLOWED AT APPLICABLE RATES. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE CIT(APPEALS) ERRED IN APPLYING THE DECISION OF THE ITAT, PUNE BENCH IN THE CASE OF POONAWALA FINVEST AND AGRO PVT. LTD. (118 T TJ 68) AS THE DECISION IS DISTINGUISHABLE ON FACTS AND DOES NOT CONSIDERED TH E RATE SCHEDULE OF DEPRECIATION U/S. 32C WHICH PROVIDES FOR DEPRECIATI ON @ 80% ONLY ON WIND MILLS AND DEVICES SPECIALLY DESIGNED TO RUN ON WIND MILLS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE CIT(APPEALS) ERRED IN ALLOWING DEPRECIATION @ 80% O N PROPORTIONATE COST IN PROCESSING CHARGES AS THE SAME DOES NOT FORM PART O F COST OF WINDMILL OR ANY SPECIALLY DESIGNED DEVICE TO RUN ON WINDMILL. 3. IN BRIEF, THE RELEVANT FACTS OF THE CASE ARE SUM MARIZED AS FOLLOWS. THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVIS IONS OF THE COMPANIES ACT, 1956 AND IS INTER-ALIA ENGAGED IN THE BUSINESS OF MANUFACTURING OF IRON, STEEL AND ALLOY STEEL CASTINGS INCLUDING GENERATION OF ELECTRICITY THROUGH WINDMILL. THE ONLY ISSUE IN THIS APPEAL RELATES TO THE DEPRECIATION ON THE WINDMILL. THE FIRST LEG OF THE ISSUE IS WITH REGAR D TO THE DEPRECIATION CLAIMED ON THE WDV OF WINDMILL PURCHASED AND INSTALLED DURI NG THE ASSESSMENT YEAR 2006-07. IN THE ASSESSMENT YEARS 2007-08 AND 2008- 09, THE ASSESSING OFFICER DISALLOWED A PORTION OF THE DEPRECIATION AL LOWABLE ON WINDMILL @ 80% ON THE GROUND THAT CERTAIN ELEMENTS ON THE COST, WH ICH WERE RELATED TO CIVIL WORKS AND ELECTRICAL ITEMS, WERE ENTITLED TO DEPREC IATION @ 10% TO 15% RESPECTIVELY AND ONLY THE COST RELATABLE TO THE MAC HINERY OF WINDMILL AS SUCH, WAS ELIGIBLE FOR DEPRECIATION @ 80%. THIS POSITION WAS CONTINUED BY THE ASSESSING OFFICER DURING THE YEAR UNDER CONSIDERATI ON. SIMILAR IS THE POSITION WITH REGARD TO THE COST OF NEW WINDMILL OF RS.8,32, 21,374/- INSTALLED DURING THE YEAR UNDER CONSIDERATION. IN THIS MANNER, THE DEPR ECIATION CLAIMED IN THE RETURN OF INCOME OF RS.6,86,23,735/- WAS REDUCED TO RS.5,95,18,185/- THEREBY RESULTING IN A DISALLOWANCE OF RS.91,05,550/-. 4. ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A), W HO HAS ALLOWED PART RELIEF TO THE ASSESSEE BY FOLLOWING HIS OWN ORDER I N THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08. IN THE ASSESSMENT YEA R 2007-08, THE CIT(A) ITA NO.2524/PN/2012 A.Y. 2009-10 ALLOWED RELIEF TO THE ASSESSEE ON SUCH COMPONENTS O F THE COST OF WINDMILL AS WERE HELD TO BE ELIGIBLE FOR HIGHER RATE OF DEPRECI ATION AT 80% IN TERMS OF THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF POONAWALA FINVEST & AGRO PVT. LTD. VS. ACIT, 118 TTJ 68. 5. PRESENTLY, BEFORE US, IT WAS A COMMON POINT BETW EEN THE PARTIES THAT THE ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 2007-08 ALLOWING PART RELIEF TO THE ASSESSEE WAS CARRIED IN APPEAL BEFORE THE TRIBUNAL IN ITA NO.890/PN/2011 WHICH HAS SINCE BEEN DISPOSED-OFF VIDE ORDER DATED 31.12.2012. IN TERMS OF THE SAID ORDER, THE APPEAL OF THE REVENUE HAS BEEN DISMISSED AND THE DECISION OF THE CIT(A) HAS BEEN AFFIRMED. THE FACT S AND CIRCUMSTANCES OF THE DISPUTE IN THE YEAR UNDER CONSIDERATION ARE IDENTIC AL TO THOSE GROUNDS RAISED BY THE REVENUE IN ASSESSMENT YEAR 2007-08 (SUPRA). IN THIS BACKGROUND, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE PRE SENT APPEAL OF THE REVENUE IS LIABLE TO THE ADJUDICATED IN THE LIGHT O F THE DECISION OF THE TRIBUNAL DATED 31.12.2012 (SUPRA). 6. ON THIS POINT WE MAY REPRODUCE THE RELEVANT PORT ION OF THE ORDER OF THE TRIBUNAL DATED 31.12.2012 FOR ASSESSMENT YEAR 2007- 08 (SUPRA) :- 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN ORDER TO APPRECIATE THE DISPUTE, THE FOLLOWING BREAK-UP OF E XPENSES ON ACCOUNT OF ERECTION AND COMMISSION OF WINDMILL I.E. WINDMILL I NSTALLED IN THE PRECEDING ASSESSMENT YEAR 2006-07 WOULD BE NECESSARY AS CONTA INED IN PARA 2.5 OF ORDER OF THE CIT(A):- S.NO. DATE NATURE OF WORK EXPENDITURE RS. 1. 30-3-2006 TOWARDS SUPPLY AND INSTALLATION OF HT ELECTRICAL YARD WITH VCB, OUTDOOR TYPE CT & PT AND HT TRANSMISSION LINE FROM WINDMILL TO GRID INTERCONNECTION POINT INCLUDING HT METERING FOR 1.25 MW WINDMILL AT LOCATION NO. K437 AT ABOVE SITE ADDRESS. 30,93,500/- 2. 30-3-2006 LABOUR CHARGES TOWARDS FINAL TESTING AND COMMISSIONING FOR 1.25 MW WINDMILL AT LOC NO. K437. 1,10,200/- 3. 30-3-2006 TOWARDS LABOUR CHARGES FOR WORK EXECUTED, FOR ERECTION AND INSTALL ATION OF WINDMILL CONSISTING OF : UNLOADING AND SAFE KEEPING OF MATERIAL, ASSEMBLY, ERECTION AND 14,32,600/- ITA NO.2524/PN/2012 A.Y. 2009-10 INSTALLATION OF WINDMILL TOWER AND WIND TURBINE GENERATOR FOR 1.25 MW WINDMILL AT LOCATION NO K-437 AT ABOVE SITE ADDRESS. 4. 4-3-2006 PROCESSING FEES 2,58,970/- 5. 31-12-2005 MEDA PROCESSING AND APPLICATION FEES 6,28,750/- 6. 31-3-2006 CONTRIBUTION TOWARDS COMMON POWER EVACUATION INFRASTRUCTURE FACILITY 37,50,000/- 8. IN RESPECT OF ABOVE SIX COMPONENTS OF COST OF WI NDMILL CLAIMED BY THE ASSESSEE, THE ASSESSING OFFICER ALLOWED DEPR ECIATION AT 15% AND NOT AT 80% AS CLAIMED BY THE ASSESSEE. THE CIT(A) HOWE VER, CONSIDERED THE ITEMS OF COSTS AT NO. 1 TO 5 QUALIFYING FOR HIGHER RATE OF DEPRECIATION BEING INTEGRAL PART OF WINDMILL. IN SO FAR AS ITEM NO. 1 IS CONCERNED, THE COST OF RS.30,93,500/- IS TOWARDS SUPPLY OF ELECTRICAL ITE MS OF THE WINDMILL ITSELF. THE CIT(A) HAS OBSERVED THAT SUCH COST IN THE INSTALLAT ION OF WINDMILL HAS BEEN FOUND BY THE TRIBUNAL IN THE CASE OF POONAWALA FINV EST AND AGRO PVT. LTD. (SUPRA) AS AN INTEGRAL PART OF THE WINDMILL COST AN D THEREFORE, FOUND TO BE ELIGIBLE FOR DEPRECIATION EQUIVALENT TO THAT OF THE WINDMILL. NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE AND THEREFO RE, FOLLOWING THE PRECEDENT IN THE CASE OF POONAWALA FINVEST AND AGRO PVT. LTD. (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE CIT(A) WHICH WE HEREBY AFFIRM. 9. TO THE SIMILAR EFFECT IS THE NATURE OF COST ENUM ERATED IN ITEMS NO. 2 AND 3 RELATING TO LABOUR CHARGES FOR ERECTION AND INSTALLATION OF WINDMILL. SUCH EXPENDITURE FORMS INTEGRAL PART OF COST OF THE WINDMILL AND THEREFORE, THERE IS NO MISTAKE ON THE PART OF THE CIT(A) TO HA VE CONSIDERED SUCH EXPENDITURE AS ELIGIBLE FOR DEPRECIATION AT 80%. 10. IN SO FAR AS THE COST TOWARDS PROCESSING FEE AN D MEDA APPLICATION FEE OF RS. 2,58,970/- AND RS. 6,28,750/ - RESPECTIVELY IN ITEMS NO. 4 AND 5 ARE CONCERNED, THE CIT(A) APPORTIONED SUCH C OST TOWARDS WIND TURBINE AND OTHER ELIGIBLE ASSETS ON ONE HAND AND OF CIVIL COSTS INCURRED, ON THE OTHER HAND. 60% OF SUCH COST HAVE BEEN APPORTIONED TOWAR DS WIND TURBINE, ETC., AND HAVE BEEN HELD TO BE ELIGIBLE FOR HIGHER RATE O F DEPRECIATION AT 80% AND ON THE BALANCE, THE CIT(A) ALLOWED DEPRECIATION AS WORKED OUT BY THE ASSESSING OFFICER. IN OUR VIEW, THE AFORESAID APPO RTIONMENT MADE BY THE CIT(A) IS FAIR AND PROPER AND DOES NOT REQUIRE INTE RFERENCE. 11. IN SO FAR AS ITEM NO. 6 REGARDING COST TOWARDS COMMON POWER EVACUATION IS CONCERNED, THERE IS NO GRIEVANCE OF T HE REVENUE AS THE ACTION OF THE ASSESSING OFFICER ON COMPONENTS AND COST HAS BEEN UPHELD. IN THIS MANNER, WE FIND NO REASON TO INTERFERE WITH THE REL IEF ALLOWED BY THE CIT(A) WITH RESPECT TO DEPRECIATION ON THE COST OF ERECTIO N AND COMMISSIONING OF WINDMILL IN RELATION TO WINDMILL NO. 1. SIMILAR RE LIEF HAS BEEN WORKED OUT BY THE CIT(A) WITH RESPECT TO WINDMILL NO. 2 WHICH HAS BEE N INSTALLED DURING THE YEAR UNDER CONSIDERATION. IN THE LIGHT OF AFORESAID DIS CUSSION, THE ORDER OF THE CIT(A) IS AFFIRMED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 7. SINCE THE FACTS AND CIRCUMSTANCES IN THE INSTANT YEAR STAND ON SIMILAR FOOTING, FOLLOWING THE PRECEDENT IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08, THE PRESENT ORDER OF THE CIT(A) IS HE REBY AFFIRMED AND THE REVENUE HAS TO FAIL ON THE AFORESTATED GROUNDS OF A PPEAL. ITA NO.2524/PN/2012 A.Y. 2009-10 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ABOVE DECISION WAS ANNOUNCED IN THE OPEN COUR T IN THE PRESENCE OF BOTH THE PARTIES AT THE CONCLUSION OF THE HEARING ON 22 ND JANUARY, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED : 22 ND JANUARY, 2014 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR, A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE